Edited version of private ruling

Authorisation Number: 1011844108597

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Ruling

Subject: Self-education expenses

Question and answer:

Are you entitled to a deduction for self-education expenses relating to your Diploma?

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

In the year ended 30 June 2011 you undertook study to obtain a Diploma.

You have incurred expenses relating to this study.

You are currently employed in an unrelated field to your study. You have been doing this job while studying.

You have undertaken the study as you believe job prospects in your current industry are poor and you wish to work in a new industry where there are better job prospects.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

Taxation Ruling TR 98/9: income tax: deductibility of self-education expenses discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348.

Similarly, if the study of a subject of self-education objectively leads to, or is likely to lead to an increase in a taxpayer's income from his or her current income earning activities in the future, a deduction is allowable.

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, & 48 - 62 of TR 98/9).

In your case, at the time of commencement of your Diploma, and also since that time, you have been employed in an unrelated industry. Therefore, at the time, your studies were not undertaken to maintain or improve an existing skill or knowledge used in your 'current' income earning activities. Nor can it be said that the subject of your studies 'objectively led to, or was likely to lead to', a future increase in your income from your 'current' income-earning activities.

Your studies were undertaken in order to obtain new employment in a new industry. The expenses associated with your Diploma are therefore considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Therefore, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for self-education expenses relating to your Diploma.